Long Term Care Case Study #2

Barbara has an identical twin sister, Brenda. She told her about the new life insurance policy that will pay for her long-term care expenses, and Brenda would like to have the same protection. Brenda does not have an annuity like Barbara, but she does have $500,000 in an IRA that is generating income which she doesn’t need or use. IRS rules require her to take distributions every year since she’s over 70 ½, but she’s just been paying the taxes and putting the remainder into conservative investments.

Alternative Solution Provides Positive Results

Barb suggests that Brenda find out about potential alternatives. As it turns out, if Brenda were to take out 5% per year or $25,000, the after-tax proceeds of approximately $20,000 would purchase the same $520,000 policy, assuming she’s in reasonably good health. Furthermore, in just a few years, Brenda will be required to take more than 5% from her IRA according to minimum distribution tables. So now Brenda can provide for a tax-free death benefit for her heirs and have access to over $10,000 per month available for long-term care for up to 50 months.